This exercise is based on this Forbes' article. The headline is "Price Of College Increasing Almost 8 Times Faster Than Wages" Here is the relevant information for our exercise (the data is taken from various sources, all numbers are in 2018 dollars, so they have been adjusted for inflation). 1989 2019 $52,892 Average Cost of 4 years College (adjusted for inflation) $104,480 $47,200 $50,390 Wage, College Graduate (adjusted for inflation) $44,302 $27,708 Wage, High School Graduate (adjusted for inflation) Time spent working during College 25% 25% Expected age of retirement Average College Graduation Age 23 The overall question we want to answer is: is College Education a good investment in 2019? Was it a better investment in 1989? Answering these questions, assume that during College students can earn the average high school wage (but working only 25% of the available hours in a year). Assume a discount rate of 5%. Assume that there is no real-wage growth over time (so the estimates of the investment will be conservative). 1. What was the present discounted value of increased earnings from getting a college degree in 1989? 2. What was the cost of College in 1989? (Calculate the present discounted value over 4 years, including both direct costs and missed earnings, from the perspective of a students that was about to start college in 1989) 3. What was the cost of College in 2019? (Calculate the present discounted value over 4 years, including both direct costs and missed earnings, from the perspective of a students that was about to start college in 2019) 4. What was the Net Present Value of the Investment in College in 1989? 5. What was the Net Present Value of the Investment in College in 2019? 6. What was the present discounted value of increased earnings from getting a college degree in 2019 (take the perspective of a students that was about to start college in 2019)? This exercise is based on this Forbes' article. The headline is "Price Of College Increasing Almost 8 Times Faster Than Wages" Here is the relevant information for our exercise (the data is taken from various sources, all numbers are in 2018 dollars, so they have been adjusted for inflation). 1989 2019 $52,892 Average Cost of 4 years College (adjusted for inflation) $104,480 $47,200 $50,390 Wage, College Graduate (adjusted for inflation) $44,302 $27,708 Wage, High School Graduate (adjusted for inflation) Time spent working during College 25% 25% Expected age of retirement Average College Graduation Age 23 The overall question we want to answer is: is College Education a good investment in 2019? Was it a better investment in 1989? Answering these questions, assume that during College students can earn the average high school wage (but working only 25% of the available hours in a year). Assume a discount rate of 5%. Assume that there is no real-wage growth over time (so the estimates of the investment will be conservative). 1. What was the present discounted value of increased earnings from getting a college degree in 1989? 2. What was the cost of College in 1989? (Calculate the present discounted value over 4 years, including both direct costs and missed earnings, from the perspective of a students that was about to start college in 1989) 3. What was the cost of College in 2019? (Calculate the present discounted value over 4 years, including both direct costs and missed earnings, from the perspective of a students that was about to start college in 2019) 4. What was the Net Present Value of the Investment in College in 1989? 5. What was the Net Present Value of the Investment in College in 2019? 6. What was the present discounted value of increased earnings from getting a college degree in 2019 (take the perspective of a students that was about to start college in 2019)